Streamlining the GSE Short Sale Process—Will It Work?

All nine mortgage insurers signed delegated agreements with the GSEs to streamline short sale and deed-in-lieu transactions. Image: Fotolia.

Fannie Mae and Freddie Mac recently issued guidelines that expand the number of potential borrowers who can qualify for a short sale, opening the door for servicers to complete additional transactions without seeking prior approval from the agencies.

The guidelines, which become operative last week, also streamline documentation requirements, waive deficiencies for borrowers that successfully complete a short sale, and set new payout standards for second-lien holders.

Moreover, the change makes it possible for servicers to sign off on short sales without seeking approval from the mortgage insurer. (All nine mortgage insurers signed delegated agreements with the GSEs to streamline short sale and deed-in-lieu transactions.)

“The new delegation agreements allow servicers to approve any short sale or deed-in-lieu that meets Fannie Mae’s requirement without individual mortgage insurance approval,” said Fannie senior vice president Leslie Peeler.

The change essentially eliminates one party that has to sign off on a short sale from delaying the transaction. “We applaud the nation’s mortgage insurers for committing to work with us and our servicers to help more borrowers obtain short sales and other foreclosure alternatives,” Freddie SVP Tracy Mooney said.

Second-lien holders can still hold up or block a short sale, if they won’t accept a $6,000 payoff.

Separately, Fannie Mae also changed its online REO sales system, allowing for documents to be signed electronically when a real estate agent or homebuyer makes an offer on a foreclosed property.

“These enhancements will make Fannie Mae’s REO sales process more streamlined and user-friendly for buyers and agents,” said Jay Ryan, Fannie vice president for REO dispositions. Fannie sells it REO properties through its HomePath program.

The National Association of Realtors has been urging the GSEs to take the step for some time. “NAR has been leading efforts to streamline the short sale process for years and applauds Fannie Mae for allowing electronic signatures on REO offers, which we believe reduces the length of time needed to complete short sale transactions,” said NAR president Moe Veissi.

Freddie Mac has accepted e-signatures on short sale and REO offers for some time, according to a spokesman. Officials with Freddie’s HomeSteps REO sales program recently sent out a notice clarifying that Realtors can make REO offers electronically (or in ink) as long as they comply with state laws regarding e-signatures and contracts. Some interpreted this announcement as something new. “It’s not,” said spokesman Brad German.

Fannie Mae started developing an online REO sales process back in 2010, launching a pilot program in Orlando, San Diego and Detroit. Fannie made the online offer system available nationwide last February.

“Instead of filling out forms by hand and scanning them in, agents and buyers have the option to access and complete the documents in a forms library, sign them electronically and submit the offer through HomePath.com in a much more efficient process.” Ryan said.